Globalization: Introduction

and Overview
 What is Globalization?

Globalization: A move toward a more integrated

and interdependent economy

Facets of Globalization: Markets and Production

 Facets of Globalization

Globalization of Markets: the merging of

historically distinct and separate national
markets into one huge global marketplace

Globalization of Production: Sourcing of

goods and services from locations around
the globe to take advantage of national
differences in the cost and quality of factors
of production
 Drivers of Globalization

1. Declining Trade and

Investment barriers
2. Technological Change
 Declining barriers

 GATT  WTO
 Trade barriers eliminated over time.
 This has resulted in a remarkable increase in world trade.
 Changes in Technology

 Rise in the use of internet

 Changing Demographics of Global Economy

4 Facts from the 1960’s that changed:

2.US dominance in World Economy
3.US Dominance in World FDI
4.Dominance of large US Multinational
firms
5.Communist national markets off
limits
Changing World Output and World Trade Picture

USA and China

 Changing Foreign Direct Investment Picture

Asian FDI excluding Japan

 Changing Nature of Multinational Enterprise

Multinational companies emerging from

countries other than USA/Europe/Japan
Smaller firms engaging in multinational
operations due to lowered costs through
internet
 Evolution of Commercial Institutions

Economic activity is the basis for social

relationships. - - True or false?
Discuss.
Past basis for societies:
3. Hunting and Gathering
4. Agriculture
5. Industrialization
 Evolution of Commercial Institutions

3 notable institutions of Agri era:

3. Agricultural landlords/barons
4. Military
5. Religious class
Changing World Order
 Global Economy of the 21st Century

Increasing volume of cross-border trade

Adoption of liberal economic policies
 Deregulation
 Lowering of trade barriers
 Acceptance of market economy by communist and socialist
nations
 Globalization Debate

Is globalization (shift toward a

more integrated and
interdependent economy) a
good thing?
 Anti-Globalization Protests

Reasons for anti-globalization protests:

That wages are pushed lower
Jobs ‘exported’ to other countries
Detrimental impacts on the environment
Globalization promotes ‘colonization’ by
other means
 Globalization, Jobs and Income

Does Globalization increase jobs and income or is it the

reverse?
 PLUS - Cheaper goods free up resources for use to
purchase other goods
 MINUS – Real wages, adjusted for inflation, for the
average lowest-income families fell by 6% between 1980 -
2000
 Globalization, Labor Policies and the Environment

Criticism of Globalization:
Manufacturers move to places where they have
fewer environmental restrictions.
 Pollution rates increase
Misuse and abuse of labor
 Carpet industry workers in Pakistan

Counter is: As per capita income increases,

emission levels decrease
 Globalization and the world’s poor

Gap between rich and poor

increasing:
 In 1870 average IPC in 17 richest was 2.4
times of others
 In 1990 the same group was 4.5 times as
rich as rest
 Managing the Global Marketplace

Challenges faced by an international

business (any firm that engages in
international trade or investment).
Challenges in:
 Use of Currencies
 Cultural understanding
 Legal and political understanding
 Historical understanding